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The acquiring company may pay cash or give some other consideration as well as issuing shares and debentures. This should be treated as a capital distribution in respect of the original shares, see聽CG57800+, to which the provisions of聽聽apply, see聽CG51875. If the amount of cash is small compared with the value of the original shares the taxpayer may elect to have it treated as a small capital distribution, see聽CG57835.

Example

• In January 2016 an individual buys 20,000 拢1 ordinary shares in Dirty Denims Ltd for 拢60,000 (拢3 per share).
• In February 2023 Elegant Evening Wear PLC makes a general offer to acquire all the shares in Dirty Denims Ltd in consideration for the payment of 拢4 cash per share and the issue of two Elegant Evening Wear PLC shares for each Dirty Denims Ltd share held. The individual accepts the offer on 1 March 2023 and so they receive 拢80,000 cash and 40,000 Elegant Evening Wear PLC shares.

The receipt of the cash on the takeover is treated as a capital distribution.

The market value of the Elegant Evening Wear PLC shares on 1 March 2023 was 拢6 per share.

Since the Elegant Evening Wear PLC shares are worth 拢6 per share it means the total value of what was acquired was 拢80,000 cash and 拢240,000 of shares (拢320,000 in total).

If the individual had just received shares, the share reorganisation rules would apply and the new shareholding would be treated as having the old shareholding acquisition price. However, the individual received a mixture of cash and shares, so we need to split the 拢60,000 acquisition costs of the Dirty Denims Ltd shares between both elements..

The part disposal formula (A / ( A + B)) is:

A = the amount or value of the capital distribution, so 20,000 x 拢4 = 拢80,000

B = the market value of the shareholding, so 拢80,000 + 拢240,000 = 拢320,000

拢80,000/ (拢80,000 + 拢240,000) = 0.25 or 25%

So 25% of the acquisition cost is allocated against the 拢80,000 cash.

75% of the acquisition cost is used as the base cost of the new shareholding.

The original shares cost 拢60,000.

So 25% of 拢60,000 is 拢15,000 and this value is used for calculating the acquisition cost allocated against the cash element.

The Dirty Denims Ltd s104 holding is now:

-	Number聽of shares	Pool of qualifying expenditure
January 2016 Acquisition	20,000	拢60,000
Less apportioned acquisition cost	-	拢15,000
-	20,000	拢45,000

You compute the chargeable gain as follows:

-听	拢
Disposal proceeds (cash received)	80,000
Less apportioned cost	15,000
Equals chargeable gain	65,000

75% of the 拢60,000 is 拢45,000 and this value is used as the acquisition cost of the 40,000 Elegant Evening Wear PLC shares